The recession of 2008 and the rise of Donald Trump

Professor Jagdish Sheth, Charles H Kellstadt professor of marketing at Emory University, Goizueta Business School recently met close friend and sometime co-presenter Devendra Chawla, group president, Food FMCG, Future Group in Mumbai. In an exclusive for BE, they discuss Trump, nationalism and the possible fallout on India. Excerpts

Devendra Chawla: How do you account for Trump and Brexit. Given that these events have caught economists, marketers and experts by surprise?

Professor Jagdish Sheth: The genesis goes back to the recession of 2008 which created an enormous loss of wealth, especially in the US. Home value collapsed completely and so did life insurance policies and pension plans.

People who were laid off had no jobs waiting. The government tried to intervene. GM had to be bailed out when Obama came in. It was true of so many companies. It created an enormously negative view of the future. The economy came back on track eventually but did so very slowly.

There was a huge disappointment with economic regression. People realised they’d had better days. The biggest impact was in the manufacturing sector and especially the Midwest white population. Which has resulted in a lot of anti-incumbency. The same thing happened during the first energy crisis. Ronald Reagan won a campaign on a simple plank: do you want four more years of the same suffering? It’s often just an emotional reaction; not even a rational thing.

The second factor brewing is a young educated population with no employment. This is why you see the rise of two extremes: Bernie Sanders on the one hand, and on the other, Donald Trump. It makes perfect sense analysed from that viewpoint. Everything would have worked well for Europe if the growth of the 90s had continued. But now the pie is not growing as much and everyone is fighting for a share.

Brexit is somewhat unique. I believe continental Europe will lose more than the UK. They have allies in commonwealth nations and the United States. India will find a great opportunity.

DC: We have seen greed work in the selling of politics: now we see fear. How do you see it being bought by people?

JS: Generally elections are won or lost on hope. If you don’t give hope, people don’t vote. They want someone who is an optimist; even if it comes by saying we can make America great again and I am the one who can deliver that. But you have to convince people you can deliver. Hope always better works in a rising economy. It’s harder to sell in a downturn.

DC: With all this talk of taking jobs back, what sort of jobs are likely to return?

JS: The kind of manufacturing that comes back to both these economies will be very high end manufacturing. Industries where the wage per hour will exceed $150 to $200; operating at a level of excellence that cannot be delivered elsewhere. Countries that did that in the past were small niche Scandinavian countries. They can’t get the large volume oriented manufacturing back without a high degree of automation.

DC: What about highlighting the country of origin? Is ‘Made with pride in America’ likely to become a more common slogan?

JS: Without talking about it publicly, America has always taken pride in the nation. It’s rare to find an American talking negatively about the country. On the 4th of July, you can see people’s faith in the nation. We accuse other nations of becoming nationalistic but the US has always been that way. We hide our problems and exaggerate what’s nice; focusing on rags to riches stories.

DC: Do you believe countries like people and brands go through economic cycles? And are these linked to nationalism?

JS: Historians believe countries have cycles. Paul Kennedy wrote The Rise and The Fall of the Great Powers. There’s a belief that like product and human life cycle, nations grow, rise, plateau and decline. Most institutions decline when they are either unwilling or unable to change. For nations, willingness comes out of crisis but ability does not come especially if you are a parliamentary democracy. There’s a political gridlock. Incumbents don’t want to change. They don’t see the future in the right way. It sometimes requires a stronger leadership; almost behaving like you are CEO of the nation.

DC: Does this turmoil represent an opportunity for Indian brands? How open are people to Indian brands?

JS: Made in India is now surprisingly becoming globally respected. It used to be a laughing stock in the 60s. I did research on trying to import Indian machine tools with IIM Calcutta and Dastoor and company as partners. HMT was a showcase. But when we spoke to people about it, they began to laugh and say India was a land of snake charmers and wandering cows. It was painful to take as an Indian.Our suggestion was to call a delegation and then have a snake charmer in front of the factory to give a contrast (Laughs).But nowadays, when I meet people at airport immigration and elsewhere, they ask me if I am a diamond merchant or a software engineer. Made in India has gone up with us investing in quality, competing on global standards. Raymond is a great example. It’s respected even in England.

I am fond of a company that is still in the ethnic market but will likely become mainstream: Haldirams. In America we have a brand called Deep Foods: It started in New Jersey. The wife made chivda and the family said why don’t you commercialise it and they did just that. Today its $500 million in revenue, I think, and they plan to bring the brand to India for a generation that does not know how to cook; outsourcing comes home. They do manufacturing in Gujarat.

DC: How do you explain the success of Patanjali in a tough FMCG market?

JS: The biggest reason is it organised a highly unorganised sector. It works again and again in India. When you aggregate each shop and what they sell, it’s a lot of buying but its mom and pop. There’s size but no scale. Patanjali created scale. From unbranded to branded, unorganised to organised. It’s got a brand ambassador like Baba Ramdev with a million follwoers. He likes to be in the limelight and the brand rides on that equity. The third thing is the internet was ready. Ptanjali has used a lot of social media, ecommerce and leveraged volunteer groups. There are stores all over America.